Eye on Polls? Govt Withdraws Sharp Cut in Small Savings Rates, Terms it ‘Oversight’

New Delhi:  Finance Minister Nirmala Sitharaman on Thursday said the government will roll back a steep interest rate cut on small saving schemes such as PPF and NSC -- saying it was an ‘oversight’, a move being seen as an attempt by the ruling Bharatiya Janata Party (BJP) to contain the fallout of a decision hitting the common man in the ongoing elections in West Bengal, Assam and three other states.

While the government routinely announces interest rates for small saving schemes at the end of every quarter, the Wednesday's decision to cut interest rate by up to 1.1% across various small savings schemes, including the National Savings Certificates (NSC) and Public Provident Fund (PPF) came a day before the second phase of polling in West Bengal including the political hotbed Nandigram, from where West Bengal chief minister Mamata Banerjee is contesting.

The decision to rollback citing "oversight" was taken hours after announcing the steepest cut in the rate on small savings schemes.

"Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn," Sitharaman said in an early morning tweet.

Interest rate on Public Provident Fund (PPF) was reduced by 0.7% to 6.4 % while National Savings Certificate (NSC) was to earn 0.9% less at 5.9 %.

The highest cut of 1.1% was effected in the one-year term deposit. The new rate was brought down to 4.4% as compared to 5.5%.

Interest rates for small savings schemes are notified on a quarterly basis.

Taking a dig at the Finance Minister after she announced that the government will withdraw orders to cut interest rate on small savings schemes, the Congress on Thursday said one can imagine the functioning of the economy when such a duly approved order affecting crores of people can be issued by an "oversight".

Once restored, PPF and NSC will carry an annual interest rate of 7.1% and 6.8%, respectively.

One-year term deposit scheme to earn a higher interest rate of 5.5% during the first quarter of the current fiscal while the girl child savings scheme Sukanya Samriddhi Yojana account will earn 7.6% against reduced rate of 6.9%.

Accordingly, the interest rate for the five-year senior citizens savings scheme would be retained at 7.4%. The interest on the senior citizens' scheme is paid quarterly.

Interest rate on savings deposits to be restored at 4% annually from the reduced rate of 3.5%.

Term deposits of one to five years will fetch interest rate in the range of 5.5-6.7%, to be paid quarterly, while the interest rate on five-year recurring deposits will earn a higher interest of 5.8% against the reduced 5.3%.